ICON66 – Volume 6
DeepStream Technologies – Intelligence Inside
Name: Mark
Crosier, CEO
Company: DeepStream
Technologies
Sector: Intelligent
Electrical
Components
Location: Bangor,
North Wales
URL: www.deepstream.com
Novel 3D Elcetronics enable next generation smart products.
When the company that Mark Crosier and his four colleagues worked for was taken over by a US corporation, they faced a bleak future as the new owner decided to close the R&D department.
The team either had to disband and go their separate ways or invest their redundancy payments to start up in business for themselves. It was time for a leap of faith, the decision that led them to establish DeepStream Technologies was certainly not an easy one.They all had wives and children to support and mortgages to pay, but they also knew that they had a superb team, great market knowledge and expertise,as well as some truly innovative new product ideas,but could they secure sufficient financial backing to make it work?
The idea that Mark and his team developed was to enable a digital signal processor to be combined with sensors so that DeepStream could then design and manufacture in virtually any three-dimensional shape.
What were
the initial
challenges
facing the
team?
“Having
made the decision
to go it alone,
we knew that
we would require
significant
investment
and probably
from more than
one source.
To understand
our options
as a start-up
and where to
start looking
for funding
was the first
major hurdle.
As if funding for a start-up wasn’t going to be difficult enough, we also decided to set up a fully-automated manufacturing base in the UK to protect our IPR, rather than attempt a complex, sub-contract or outsourced operation. This was going to make for an interesting few months! We met with James Thomas at ICON Corporate Finance,who worked with us to explore what our funding requirements and strategic options were. We then set about developing a plan appropriate for the venture capital community. The starting point was having a good plan, not only outlining strategic direction, but also addressing the key issues that potential investors would focus on.
James worked hard to get us into meetings with a selection of highly qualified and experienced investors and soon a consortium of interested parties began to take shape.
We were also introduced to Doughty Hanson Technology Ventures and HSBC Technology Banking and progress came rapidly. We eventually closed on a round of funding which would see both parties committing funds up to £10 million alongside a substantial RSA grant.
What made the difference to successful fundraising was being able to speak with investors with relevant experience. We hadn’t the luxury of trying to educate our audience and accessing the most appropriate contacts quickly was vital.”
What lessons
did you learn?
“Securing
that all important
reference customer
should not
be underestimated!
Someone’s
willingness
to buy your
product changes
the complexion
of the deal.
An engineer by profession, it pains me to admit what became blindingly apparent, that investing is not all about the technology. Having the best technology in the world is worthless unless you are able to sell it. Venture capitalists want to understand how you can develop and grow a great company rather than the underlying technology and, as such, your commercial strategy is paramount. Ask yourself:
Who are
your customers?
What are your
strategic relationships?
What sales
channel strategy
will you adopt?
Who will compete
with you?
How will you
defend yourselves?
If you don’t know your markets and how you will penetrate or grow them, how can you expect someone else to back you?”
Would I
do it again?
“I thought
only recently
how exciting
a period in
my life the
fundraising
process was.
I have learnt
an enormous
amount from
the exercise,
but cannot
recommend highly
enough that
you make sure
you have the
right team
of people behind
you – and
I include the
quality of
your advisers
in that. Without
doubt I would
do it again.”
What is
life like post-investment?
“No less
frenetic! The
pace has not
relented and
the challenges
have certainly
grown. As well
as the usual
concerns about
maintaining
product development,
winning new
customers and
managing the
company’s
growth, my
board is relishing
the challenge
of recruiting,
managing and
motivating
our ever expanding
team.
We are very lucky to have Doughty Hanson as our investors. They bring a wealth of experience,contacts and strategic support well beyond their financial investment. I would certainly advise other entrepreneurs to do their own due diligence on their investors to make sure that there will be a good fit culturally and personally.Remember that you will have to work with these people for the long-term, so do your homework.”
DeepStream Technologies is now one of the UK’s fastest growing companies and one of the most important domestic manufacturing start-ups in recent years. Within a year of completing funding the company has already secured contracts worth in excess of£30 million and has grown to a team of 45.
VC Comment
Nigel Grierson, Managing Director, Doughty Hanson Technology Ventures, tells ICON what he looks for in a deal.
“When I am reviewing an investment I am looking for three things:
1. Is the
company run
by an outstanding
management
team?
2. Is the product
or service
addressing
a big market
segment?
3. Does the
product or
service have
potential to
attain
a leadership
position in
that segment?
When I met the DeepStream founders, it was clear that this was a team that not only had all the technical skills and knowledge to execute its plan, but also had the passion and commitment to succeed. This was a team that was thinking like a business as well as thinking like engineers.
Today, the team has delivered to its plan and is clearly excited at what it has achieved and what is ahead. I am excited too – they have a real focus on increasing shareholder value in their business.”
